(Corrects ninth paragraph to show number of contractor
protests was most since fiscal 1995 in story published June 5.)

June 5 (Bloomberg) -- The U.S. Air Force was set to deliver
aircraft to the Afghan military in April. Its suppliers have
just started building them.

The contract, with a maximum value of $950 million, was
awarded to closely held Sierra Nevada Corp. and Brazilian
subcontractor Embraer SA in December 2011. Since then, it has
been protested by Beechcraft Corp., canceled, re-bid, re-awarded
and contested yet again.

Federal contract protests have almost doubled in six years,
which may partly reflect heightened competition for a shrinking
pool of awards. The challenges, which automatically halt work,
have delayed aircraft used to fight wildfires as well as light-attack planes and related training for the Afghan Air Force.

“You have to have aircraft in order to train,” said Taco
Gilbert, a vice president at Sparks, Nevada-based Sierra Nevada,
which is providing avionics and instruction under the contract.

Sierra Nevada officials had planned to supply the first of
Embraer’s 20 turboprop aircraft in April 2013, Gilbert said.
Instead, they won’t be delivered until mid- to late 2014, as the
U.S. plans to withdraw the last of its combat troops from
Afghanistan.

The U.S. Forest Service may find itself in a similar
situation. A protest of a contract for as many as seven air
tankers used to drop flame retardant means the 2013 wildfire
season may be over by the time the planes are flying, said Mike
Saccone, a spokesman for Senator Mark Udall, a Colorado
Democrat.

‘Modern Mega-Fires’

The Forest Service is “being forced to fight modern mega-fires with Korean War-era aircraft,” Saccone said. Colorado
suffered its most expensive fire season last year, with an
estimated cost of $450 million to insurers as of July, according
to the Rocky Mountain Insurance Information Association.

There’s little the agencies can do to prevent the
automatic, 100-day work delays triggered by protests to the U.S.
Government Accountability Office, which arbitrates contract
disputes.

Protests have jumped 87 percent to 2,475 in the fiscal year
ended Sept. 30 from fiscal 2006. The number of challenges last
year was the most since fiscal 1995.

The boost may be partly due to increased competition over
declining awards in recent years. U.S. contracts fell about 4
percent to $512 billion last year from fiscal 2010, according to
data compiled by Bloomberg.

Embraer Coup

For companies such as closely held Beechcraft, securing
contracts is key as the Pentagon and other agencies slow
spending. The company’s direct military contracts plunged about
68 percent to $331 million in fiscal 2012 from fiscal 2009,
according to data compiled by Bloomberg. Beechcraft announced on
Feb. 19 that it had emerged from bankruptcy protection.

For Embraer, the award is a coup. The company is trying to
tap the U.S. military market and expand its defense unit, which
produced 15 percent of its 2011 sales.

As a last-ditch effort, the government can supersede the
stays with an override, which requires the officials to justify
an urgent need or show that it’s in the best interest of U.S.
taxpayers.

In March, the Air Force chose to override the latest
protest from Wichita, Kansas-based Beechcraft, authorizing
Sierra and subcontractor Embraer to resume work.

The military, in a memo to the GAO, cited “unusual and
compelling circumstances that significantly affect the national
security interests of the United States and its coalition
partners.”

GAO Protests

Beechcraft has called the override unjustified, saying in a
statement that the Air Force’s decision would lead to higher
costs to taxpayers. It lost its challenge of the override at the
U.S. Court of Federal Claims. The GAO has until June 17 to make
a decision on the company’s protest of the contract.

Agency officials rarely use overrides. Even as protests
soared, overrides have dropped by almost half to 33 in fiscal
2012 from 62 in fiscal 2006, according to GAO data obtained
through a Freedom of Information Act request.

Their waning popularity may be a result of increasing
scrutiny from the Court of Federal Claims, which has let
agencies know that it’s “not going to give them a free pass,”
said Daniel Forman, a partner and co-chairman of the government
contracting unit at the Washington-based law firm Crowell &
Moring LLP.

Two Wars

The decline also may reflect the wind-down of two wars and
agencies’ reluctance to take on more risk and costs. After all,
an override won’t put an end to a protest: It allows work to
resume while the GAO is deciding.

The decision doesn’t always favor the original contractor.
The Army last year used an override to provide intelligence
support in Afghanistan after Mission Essential Personnel LLC
challenged orders valued at as much as $71 million to a
subsidiary of New York-based L-3 Communications Holdings Inc.
L-3 got 76 percent of its revenue in 2012 from the U.S.
government, according to a federal regulatory filing.

Closely held Mission Essential Personnel, based in
Columbus, Ohio, argued that the service failed to engage the
company in adequate discussions. The GAO later sustained the
protest.

Another approach is to simply acknowledge that protests are
so much a part of today’s acquisition process that agencies
should plan for them.

‘Protest Hell’

Sue Payton, who was assistant secretary for acquisition at
the Air Force from 2006 to 2009, said she used to build
potential delays into the timeline for planning contracts.

The most effective way of avoiding challenges, though, is
making sure the contracting process is fair and complete from
beginning to end, according to current and former military
officials.

“Getting the requirements right up front saves you from
protest hell,” Payton said.

The Army tries to deter protests with contract
solicitations that are “thoroughly scrubbed” to make sure they
are clear, concise and compliant with federal regulations, said
Matthew Bourke, a spokesman for the service. It also works to
keep “a very open dialog with our industry partners,” he said
in an e-mail.

Even so, there’s no way to avoid the challenges, Bourke
said.

Once they start, they can drag on so long that they risk
affecting public safety.

Colorado Wildfires

Senator Udall on May 6 urged aviation companies “to put
lives before legal disputes” by allowing the U.S. Forest
Service to move forward with contracts for as many as seven
next-generation air tankers used to fight fires.

“Additional unnecessary appeals and other delays may be
simple calculations of dollars and cents for contractors, but
slowing the acquisition of a robust air tanker fleet could risk
the lives and homes of Coloradans living in wildfire-prone
areas,” Udall said, according to a statement.

Udall also called for the U.S. Forest Service to override
the automatic delay triggered by a protest filed that month by
Neptune Aviation Services Inc. The Missoula, Montana-based
company had been passed over for the tanker contracts, valued at
about $60 million over five years, according to Saccone. They
were awarded to five closely held companies.

There have been no significant changes to the automatic
delays in almost two decades. Congress in 2009 requested that
GAO assess whether frivolous protests were rising. The office
responded that attempts to discourage those challenges might
backfire by adding costs and deterring “good-faith protests.”

Checks, Balances

Protests can serve as checks and balances to a sometimes
opaque and flawed contracting process.

A prime example is the Air Force’s attempt to procure
aerial refueling tankers. Chicago-based Boeing Co. eventually
prevailed against competitors European Aeronautic, Defence &
Space Co. and Northrop Grumman Corp.

Boeing’s first attempt at the $35 billion contract was
derailed in 2004 by a scandal involving former top Air Force
procurement official Darleen Druyun and then-Boeing Chief
Financial Officer Michael Sears. Sears offered Druyun a job in
October 2002 during the initial tanker negotiations. She was
hired in January 2003.

Sears and Druyun were convicted of violating federal
conflict-of-interest laws.

Boeing was awarded the contract in February 2011, about 10
years after the Air Force first proposed the tanker-replacement
program.